All you wanted to know about critical illness insurance

So here is the scenario which helps me drive home the point about the importance of critical illness insurance policy in India.

Suppose you are hospitalized with a major heart attack and your spouse is told by the doctor that you need to be operated upon. Big deal you think, you have health insurance or mediclaim to take care of this mishap. But there is a small hitch though.

The operation is going to cost you around Rs 5 lakhs, more than what your mediclaim can provide for and don’t forget the hospitalization bills which includes room rent, medicines and what not.

If only there was someone who could pay that 5 lakhs.

Well, you are in good luck, pardon the heart attack. Health insurance companies are ready to make a one time payout to you but you need to have critical illness plan to avail that.

What is critical illness plan ?

Simply put, this is a health policy where in if you are diagnosed with any critical illnesses, then you are given a lump sum money, irrespective of whether you were hospitalized or not. So in that sense, this does not qualify as a reimbursement policy but is a defined benefit plan.

A critical illness will most probably affect the earning potential of an individual so the benefit paid out by such a policy will help the entire family in dire times.

To take an example, if in the above case, the person has a mediclaim policy of Rs 2 lakh and a critical illness policy of say Rs 6 lakhs, and if the hospitalization charges for the 5 lakh operation was Rs 1.5 lakhs, then the mediclaim will reimburse Rs 1.5 lakhs as should be the case normally and over and above this, another 5 lakh will be given out under the critical illness terms and conditions.

These policies are provided both by general insurance companies and life insurance companies, the latter as riders to a life insurance policy that you take from them.

What is defined as critical illness ?

Most of the insurance companies have their own definition of critical illnesses but there are some 10 -12 that are common.

The common list of critical illnesses are :

Paralysis

Cancer

Stroke

Coronary artery surgery

Renal failure (failure of both kidneys)

Multiple sclerosis

Major organ transplants like kidney, lung, pancreas or bone marrow

Aorta surgery

Heart valve replacement

Points to note for such a policy

As is the case with financial products, there are many caveats you need to be aware of when purchasing such a policy.

If you die within 30 days of the illness being diagnosed, you will not get the claim. You will also not get the cover if the illness is diagnosed within 90 days of taking the policy. These differ between insurers so please read the fine print.

The term CRITICAL is up for discussion – so a minor heart attack cannot possibly be a critical case and so the insurance company will not dole out the benefits to you. Once you make a claim, the insurer will have a panel of experts to infer whether the case is critical and payout needs to happen. So do not assume that you will get the money if you have a heart attack or say, cancer – the criticality of the diseases is very important in the purview of critical illness policy.

While general insurers offer a critical illness cover for 1-5 years, life insurers provide it as a rider for a longer term—10-20 years.

Some insurers will limit the amount of money that will get paid out if a critical illness is diagnosed. When this happens, the rest of the sum assured is carried forward to cover other illnesses. So more future claims can be done till the entire sum assured is consumed – after that, naturally the policy terminates. This feature is called coverage continuation option.

Some insurers will allow you to top up the sum insured in the future when your liabilities increase, so check that before you buy.

Please remember that this is not a replacement for a mediclaim policy but a supplement – you might still land up in the hospital with a illness which is not covered under the critical illness and run up a huge bill. So take mediclaim first and then go for a critical illness cover.

How to pick the right cover ?

Before you call the only agent you know and ask for a cover, make sure you –

understand how many critical illnesses are covered under the plan you are taking

have compared at least 3-4 policies to arrive at the right one

go for a policy with the highest age renewal limit

understand the exclusion i.e. what will not be covered

go for one with coverage continuation option

understand whether there is an option to increase the sum insured

How much cover do I really need ?

You can use a rule of thumb here. Approximately, 2 to 3 times of your income is advisable.

So for someone earning say 5 lakhs, the sum insured could be between 10 – 15 lakhs.

I looked at ICIC LOM, HDFC ERGO, TATA AIG and BAJAJ ALLiance, Actually i was looking for maximum number of disease and i found that Bharti AXA has that. Not sure if anyone else is giving even more than AXA, I never looked at the price point, however from this article seems like Bharti AXA is cheap. the only disadvantage is max cover 5L. and i was looking for atleast 25 L. also not sure about the claim ratio, but when i called CC they told its 92%

Actually i am not, i am gathering these details from different sources,like blogs, i also spoke with mediassist , and they shared the details of CI for the Above 4 company, it stated 8 to 11 diseases only.

This one 35 disease is really good, what i dont like to the PTD and accidental death, They need to remove that and only keep it as CI, that way it would be prized lower, I am also looking at Personnel accident separably so mixing wont make sense.

@vikrant, Hi Vikrant, Thanks for sharing Bharti AXA details, it is very helpful.
Even I am looking at personal accidental insurance and CI separately. I have narrowed down personal accidental insurance with Bajaj Allianz and doing some feedback research on net. Their claim settlement ratio is 91%.

For CI I was looking at Tata AIG but Bharti covers more illness so need to do a comparison and bit more research now. I personally don’t like ICICI due to the bad goodwill they have in market.

@Radhey Sharma, It is my general opinion about ICICI. I have always read negative things about ICICI. The way their recovery agents treat home loan defaulters, the amount of “mistakes” they do in credit card bills and make customers run to rectify it for no fault of their own. The word “ethics” does not seem to exist in their dictionary.
The other day I posted a link from jagoinvestor about how customers fought and got money back. Again they were from ICICI.
There is an online consumer court forum who assist people in filing cases. Even they have blacklisted ICICI, mentioning that maximum number of cases are against them.

I know there may be others like them as well but ICICI is right on top in my blacklist.

@ vivek, Hi Vivek, bajaj allianz, premium or personnel gaurd? and are you planning to take this directly from company or medimanage? additionally may i know what made you took Bajaj A agains others apart from claim radtio?

@vikrant, So far I was enquiring about personal guard. I read on internet that the premium personal guard is no longer available but I have to check again. I am dealing directly with Bajaj Allianz.
Why I chose Bajaj Allianz: –
1) High claim settlement ratio. This is one of the biggest criteria for me because even if your claim is genuine, companies make you run for your money.
2) 125% SA in case of PTD. The main reason for me to buy accidental insurance is to protect myself in case any mishap. All other companies provide 100% SA.
3) Coverage of upto 60 times of your monthly income.

There are other reasons as well like reasonable premium, good coverage for other disabilities but the above are my top 3 reasons.

I came across medimanage very recently. I am considering them so that they can assist during the time of claim. I am sure they are more empowered than me. Do you know anything about their services and charges?

@Vivek K, Vivek, They wont fight with the insurance companies, its juts that they will collect your document, submit for claim, talk to the insurance companies or the TPA, if you have any issues. if you have a valid claim then you wont need the battle. And yes i have used their services from my comapny, they are good you dont have to run around, they do the running for you, however it might take good amount of time cause TPA and INS companies will do all possible to reject your claim if you are not careful and not submitting all the documents.

@vikrant, In case you need help call them and talk to this guy from medimanage by name ANIKET, he is good and would help you answer all your question, if you want tell him i referred you. the good point is he will never persue you to buy the policy, he will give you all the required info and you can take your time and decide to buy when you want.

@vikrant, Remember that insurance companies offer a better service to group insurnace than to individuals. I am nto saying through medimanage the service will be better or worse, but my take is that one needs to fight the battle themselves.

Remember when you buy directly from a general insurance company, you get a Health Advisor who helps you with the claim.
Chase him to get your job done !

@Radhey Sharma, More often than not the guy would have left the company when the time arrives for settling a claim. Even if the guy is there he is still representing the company who would try hard to reject the claim.
In case of medimanage or someone similar the chances of company disappearing altogether is very slim. So, you have some support.

I agree we have to fight our own battles but good to have a supporter with you especially when it is representing customer and certified by IRDA. What do you say Radhey?

@Radhey Sharma, Ok, I had a chat with them and they deal in all kinds of health insurance like medical, accidental, CI etc. They deal with corporates and individuals both.
I have asked for details on accidental policies, I might use their services to buy a policy.

@Radhey Sharma, Did you hear anything from medimanage? They were supposed to email me the accidental policy details but haven’t heard anything from them yet. A bit strange, having second thoughts now about their service.

As you all experts replying, I do have one query as below:
Suppose I have mediclaim policy of 7 lakh and even critical illness policy of 5 lakh. And I get dignosed with and undergone to illness under critical illness category. And suppose expences occur 4 lakh.
Then am I entitled to claim under both policies? If yes then what about document need to be supplied as hospital won’t provide same original copy they may marked duplicate copies.

If you get hospitalized for 24 hrs, then yes, mediclaim would be help in reimbursement to the extent of actual spends during hospitalization. As far as critical illness is concerned, you will get a one time payout which is not related to your mediclaim at all. So there is 100% chance that you get money from both policies.
As far as documents are concerned, a duplicate will work as you cannot get 2 originals.

Very valid point on the documents. Mediclaim will pay for your hospitalization expenses whereas critical illness will pay you 5 lakhs upfront if you are diagnosed with the disease. So in the above case the disease will be diagnosed first and the hospitalization done at a later date.
Also it would help to get the documents notarized.

Friends just to add some points over here. I was a big fan of Critical illness policy and used to advise all my clients untill i understood the Criticality aspect through
the policy wordings. some are as below

Kidney Failure requiring Regular Dialysis:End stage renal disease presented as chronic irreversible failureof both kidneys to function, as a result of which either regular
renal dialysis (haemodialysis or peritoneal dialysis) is institutedor renal transplantation is carried out.

First Heart Attack of Specified Severity:The first occurrence of myocardial infarction which means thedeath of a portion of the heart muscle as a result of inadequate
blood supply to the relevant area.

All the conditions are related to some specific severity. I discussed this with one of my doctor frien to which he replied that in these health conditions there are very few chances that they discharge the patients.and also there are very rare chance of the patient to survive.
Now this means that as long as he’s in hospital, he has to bear hospitalisation cost. Thus for him hospitalisation cover is more important then Critical Illness. and moreover as CI policy is a fixed benefit plan, so i generally feel that one should continue with the cover only till he doesn’t accumulate the same amount in “Health benefit fund”.So now i m not in favour of critical illness plan.

In Accident policy i feel that one should not ignore the “Temporary total disablement benefit”…and one should go with one which offers the maximum of this.

Thanks for your detailed explanation on CI. So in the above case you would advise individual to have a good Sum Insured in his mediclaim policy. Also in the above case if CI is taken for 5 lakhs, the company would pay him, right.
So there is benefit of taking CI in the above case.
Agree with you on accident policy. Can you recommend any companies which you have advised your clients and share your experience?

Yes, i advise clients to get good sum assured in mediclaim and also to built a corpus as “health emergency fund”.
Yes, if CI is taken then company will pay the lumpsum amount provided the condition of criticality satisfies.
I personally recommend Apollo Munich Personal accident policy.It offers 15 lakh of TTD benefit which i guess is maximum is the industry. But Please note that the coverage under PA policy completely depends on one’s current income.

Thanks once again for your feedback. I had shortlisted Apollo Munich & Bajaj Allianz for Personal accident, still not decided which to go with.
As for CI, given today’s lifestyle we live in i think by the time we get to 40-45 years the chance of a stroke is very likely. Would it not be better to go for a CI then?

Rakesh, CI is a good policy and yes, as you rightly said that chance of major health disease going forward in today’s lifestyle is very much there.
But One has to be planned from every front, I don’t think 5 lakh or 10 lakh cover would be enough for that kind of health condition. Maintain enough liquidity and save enough corpus for managing that kind of emergency.

Is there any website where the different critical illness insurance policies can be compared? Have searched around a lot without much success. Would also appreciate if someone recommends the best product in terms of maximum term, fixed premium and widest coverage of diseases. Thanks in advance.

I agree with @manikaran rgd the fineprint of the critical illness…..we as lay man would just see that our policy covers 20 illness but there are a lot of if and buts with which the company would play with.That is quite disheartening.. i had personally liked max bupa..but will do some more research before opting for one now…..

As i had mentioned i had shortlisted MAX BUPA for its coverage of 20 illness,floater policy,lifetime renewable and online features but i must admit the fine print of each particular illness broke my heart! If your illness dont turn out the way your company want it be you are stck with a sore thumb in those critical times! im now in two minds whether to just increase my mediclaim policy OR take a smaller CI than i had proposed…….. would be helpful if someone puts up the claim settlement ratio of all the companies.

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[…] Health insurance – popularly known as Mediclaim policies – can also be decent tax saving schemes for individuals. Mediclaim policies cover the costs occurred due to accident or hospitalisation. It can also cover the expenses of pre and post hospitalisation procedure depending on the sum assured of the insurance policy. Mediclaim policies offer tax benefits under Section 80D. A policyholder can avail tax benefit on the premiums paid for their own health insurance policies as well as for their parents (senior citizen). Also, money received after the maturity of the Mediclaim policy is tax-free under the critical illness insurance policies. […]

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